VIETNAM: Cement producers face market glut

HCM CITY — The competition in the cement market will become stronger this year as output outpaces demand, experts have said.

Figures from the Ministry of Industry and Trade show that the country produced 50.85 million tonnes of cement last year, equalling 101 per cent of the year's target. However, domestic demand last year was about 48.5 million tonnes, resulting in an excess of about 2 million tonnes.

As at least seven more cement plants will be put into operation this year, the cement surplus is expected to be higher this year, between 5 to 10 million tonnes.

An oversupply of cement had made cement producers hesitant to raise cement prices despite increased input costs, including electricity and coal, which had strongly risen in the past three years, said Le Van Toi, head of the Construction Material Department under the Ministry of Construction.

Cement prices had only increased by between 13-15 per cent since 2008, while coal prices had doubled, he added.

To avoid overproduction, the Ministry of Construction has promoted cement use domestically such as for rural transport construction projects, and reviewing import and export of ashlar paving stones and encouraging the use of non-fired materials.

To ease competitive pressure, many domestic cement producers, including Cam Pha Cement, Viet Nam Cement Industry Corporation, Vinakansai Cement and Thang Long Cement, have sought to increase cement exports to foreign markets such as Cambodia, Laos, Singapore and Bangladesh.

However, the volume of exports to these countries is still modest.

Last year Vinakansai Cement Joint Stock Company, exported nearly 100,000 tonnes of clinker to Singapore and 70,000 tonnes of clinker to India and signed a contract to ship 100,000 tonnes of clinker per month to Bangladesh.

Thang Long Cement Joint Stock Company last month shipped 25,000 tonnes of cement to Africa.

Le Do, general director of Thang Long Cement Joint Stock Company, said his company was eying more exports to Africa, a market with strong potential and high demand.

The country plans to export 1.5 million tonnes of cement this year, an increase of 500,000 tonnes over last year, according to Viet Nam Cement Association.

However, experts warned that cement exports may not bring attractive returns because of high transportation costs.

There are currently 90 firms nationwide producing or trading cement. Of these, 33 are subsidiaries of the State-owned Viet Nam Cement Industry Corporation, five are foreign-invested joint ventures and 50 are smaller producers. — VNS